Early settlement of a personal loan in the UAE: fees and steps

Central Bank rules cap the fee for repaying a UAE personal loan early, in full or in part, at 1%, with a maximum of AED 10,000 before VAT. Once the loan is fully settled, the lender cannot charge interest for the months that remain. Ask for the settlement figure in writing, pay it, then collect your cheques and a no-liability letter.

Key takeaways

• The fee for settling a personal loan early, in full or in part, is capped at 1% with a maximum of AED 10,000, before VAT.
• After a full settlement the lender cannot charge future interest; after a partial one, interest must fall in line with the principal left.
• Your Key Facts Statement must show how the early settlement fee is worked out, with an example.
• The lender must return your remaining post-dated cheques within 7 complete business days of the payoff, and issue a no-liability letter within 7 complete business days of your request.
• If you move the loan to another lender, your current lender can charge at most 1% of the outstanding balance or AED 10,000, whichever is less.

This guide covers clearing a personal loan you can pay; agreeing to pay a bank less than you owe is a different process, covered in negotiating a debt settlement, and car loans have their own cap and release steps, covered in early settlement of a car loan. Every loan, rate and balance below is an illustration.

What a lender may charge you

A lender may charge at most 1%, with a maximum of AED 10,000, plus VAT, whether you settle in full or in part, and no fee outside the Central Bank’s table without its approval.

Early settlement fee cap, personal loans

1%, max AED 10,000

For consumer (personal) loans, the fee table caps early settlement from other bank loans, final settlement from other sources such as end-of-service benefits, and partial payment at 1% each, with a maximum of AED 10,000.

The three settlement lines in the fee table

Appendix 2 of Regulation 29/2011 has three consumer loan lines for paying early, each with the same cap, and one for paperwork:

Source: Regulation 29/2011, Appendix 2. No line names settlement from your own savings, but whichever line a lender uses, the cap is the same.

The table does not say what the 1% is charged on: the outstanding balance, the amount you pay early or the original loan. Its home loan rows say “1% of outstanding balance”, and the rule for moving a loan to another lender also uses the outstanding balance. Your lender’s method must be in your Key Facts Statement. United Arab Bank’s personal loan Key Facts Statement (opened 13 October 2026), for example, applies 1% to the remaining balance for a full settlement and to the payment amount for a partial one.

The caps are maximums: the same appendix says the Central Bank checks that lenders do not automatically charge the maximum where their actual costs may be lower.

VAT and fees outside the table

The caps are stated before VAT, so VAT at the standard rate of 5% is added to the fee (Ministry of Finance). On the AED 10,000 maximum, that is AED 500 of VAT, AED 10,500 in all.

A lender may not charge any fee, commission or fine that is not in the table without the Central Bank’s written approval. If a settlement statement shows a charge you do not recognise, ask which line of the table or which approval it relies on, and see your rights as a borrower.

Islamic personal finance

Islamic lenders may charge an early settlement fee only to cover the actual costs the settlement causes them, in line with a Higher Shari’ah Authority resolution, and must follow the Central Bank’s early settlement rules (Consumer Protection Standards, Article 11); the fee table’s caps apply to them too. How profit differs from interest is explained in Islamic vs conventional finance, and a guide to Islamic personal finance is planned.

Full or partial settlement: what happens to your interest

Settle in full and interest stops on the settlement date; pay off part of the loan and the interest is recalculated on the smaller balance.

Interest after early settlement

No compounding

Lenders may not charge interest or profit on accrued interest on any consumer credit product, and may not charge future unearned interest after a loan is fully settled early; after a partial early settlement, interest must be adjusted to the remaining principal.

The rules do not say how the schedule changes after a partial payment: a lender can lower the instalment and keep the end date, or keep the instalment and finish sooner. Which it offers is its own policy, so ask before you pay.

Interest is charged on the reducing balance, so the interest part of each instalment is largest at the start and shrinks as the balance falls (how reducing-balance interest works). Settling early therefore avoids the most interest early on: on the loan below, the first 18 instalments carry AED 10,598.41 of interest and the last 30 only AED 7,331.96.

Worked example: settling early in full and in part

On an AED 120,000 loan at a 7% reducing rate over 48 months (instalment AED 2,873.55), settling in full after 18 instalments saves AED 6,503.77 after the fee and VAT, and an AED 30,000 part payment saves AED 2,473.72 or AED 4,268.79.

Worked example

Full settlement after 18 of 48 instalments: AED 120,000 at 7%

The loan, the rate and the timing are illustrations. The fee base is an assumption: the fee table does not state it, so this example applies the 1% to the outstanding balance, as the table’s home loan rows do.

1. Outstanding balance just after the 18th instalment: AED 78,874.52.
2. The 30 instalments left would total AED 86,206.48, so the interest you no longer pay is AED 86,206.48 minus AED 78,874.52 = AED 7,331.96.
3. Fee: 1% × AED 78,874.52 = AED 788.75, below the AED 10,000 ceiling.
4. VAT on the fee: 5% × AED 788.75 = AED 39.44.
5. Amount to pay: AED 78,874.52 + AED 788.75 + AED 39.44 = AED 79,702.71, plus any interest accrued since the last instalment.
6. Interest saved minus fee and VAT: AED 7,331.96 minus (AED 788.75 + AED 39.44) = AED 6,503.77.

Settling in full at this point saves AED 6,503.77 after the fee and VAT.

Worked example

Paying AED 30,000 early at the same point

Same loan and timing. The fee base is again an assumption: 1% of the amount paid early, AED 300, plus 5% VAT of AED 15, so AED 315 in all.

1. New balance: AED 78,874.52 minus AED 30,000 = AED 48,874.52.
2. Option A, keep the 30-month term: the instalment falls to AED 1,780.59.
3. Option B, keep the AED 2,873.55 instalment: the loan ends after 18 more instalments, the last one AED 2,772.35, so 12 months early.
4. Interest saved is the AED 7,331.96 still to pay before, minus the interest still to pay after.

	A: keep the term	B: keep the instalment
Monthly instalment	AED 1,780.59	AED 2,873.55
Instalments left	30	18
Interest still to pay	AED 4,543.24	AED 2,748.16
Interest saved	AED 2,788.72	AED 4,583.79
Saved after the AED 315 fee and VAT	AED 2,473.72	AED 4,268.79

Keeping the instalment saves AED 1,795.07 more interest, because the smaller balance is cleared 12 months sooner.

If your lender applies the 1% to the whole balance for a part payment, as the home loan rows do, the fee would be AED 788.75 plus VAT instead. The examples use the monthly method (annual rate ÷ 12) and unrounded figures, so option B may differ by 1 fils; banks count interest by the day, so their figures differ slightly and depend on the date you pay.

How to settle your loan, step by step

Check your terms, get a written settlement figure, pay it before it expires, then collect your cheques and a no-liability letter and check your credit report.

1. Read the early settlement terms. The lender must disclose whether you can settle early, which fees apply, how they are calculated and when they are payable, with a worked example of the fee in the Key Facts Statement (Consumer Protection Standards, Article 2).
2. Ask in writing for a settlement (redemption) statement. Request a breakdown: the amount needed to close the loan on a stated date, with principal, interest to that date, fee and VAT on separate lines. Issuing the statement on a consumer loan is capped at AED 25 before VAT.
3. Pay by the date on the statement. Keep the receipt, and ask whether your next instalment will still be collected while the request is processed.
4. Get your cheques back. The lender must return the remaining post-dated cheques within 7 complete business days of the payoff (Article 7). Check them against the stamped photocopies it gave you, and keep the account they are drawn on open until every one is back.
5. Ask for a no-liability letter. The deadline runs from your request, so make it in writing as soon as the payment has gone through.
6. Check your credit report. After the lender confirms the closure, check your AECB report to see that the loan shows as closed; if it does not, that guide explains how to get it corrected.

No-liability letter

7 business days

A consumer can ask the lender at any time for written confirmation of whether any liabilities are owed; the lender must issue a letter of no liability, or, if something is still owed, a letter of liability with the details and amounts, within 7 complete business days of the request.

What such a letter should state is covered in our guide to closing a credit card and clearance letters.

Settling with a loan from another bank

You can move the loan to another bank or finance company, and your current lender can charge at most 1% of the outstanding balance or AED 10,000, whichever is less.

Fee for moving a loan to another lender

1% or AED 10,000

A borrower may move a loan or financing to another bank or finance company in the UAE on paying an early-payment fee of no more than 1% of the outstanding balance or AED 10,000, whichever is less.

Your lender must allow the transfer without undue delay and cannot require you to explain the move or share the competing offer, unless it has evidence suggesting a risk of financial crime. Any offer to keep you must be in writing (Article 5).

Before it refinances your loan or combines it with other debts, the new lender must give you a written comparison of the total interest if you keep your existing loans against the total on the new one; see debt consolidation. Topping up the same loan instead is covered in personal loan top-ups.

Settling from your end-of-service benefits

If you clear the loan from end-of-service benefits or another source, the fee table line “Final settlement from other sources/EOSB” applies, with the same cap: 1%, maximum AED 10,000, before VAT. If you are leaving the country, see settling a loan before you leave the UAE for the order of steps.

Does settling early save money?

It saves money when the interest left on the schedule is larger than the fee plus VAT, and the saving shrinks the later you settle. Here is the same AED 120,000 loan settled in full at four points, with the fee on the outstanding balance:

With 6 instalments left, the fee and VAT take about half of the interest avoided. At a higher rate, more interest is avoided at every point.

Then there is the cash. Money used to settle is no longer available for emergencies or for other debts, and each dirham paid off a debt with a higher rate avoids more interest a month; credit card interest and fees explains how card interest is charged.

If your Key Facts Statement lists insurance premiums over the term, ask what happens to the cover and the premiums once the loan is closed. The loan payment calculator shows what the loan costs if you keep it, the glossary sums up early settlement, and more topics are in the Personal loan guides.